The Toughest SOBs in Business
"Every successful enterprise requires three met: a dreamer, a businessman and a son-of-a-bitch."-- Peter McArthur, 1901
Actually, we were looking for all three in one. In business, as in any other field, there's a tendency to portray people as heroes or villains. But reality is much more complex. The trajectory of even the most successful company or CEO is rarely straight up. There are crises, conflicts, defeats and eventual victories. The most effective corporate leaders embody a rare combination of vision, skills and expertise, and perhaps most crucially, toughness.
When we first discussed a group portrait and profiles of some of Canada's legendary tough guys, the names of some very intense individuals-past and present-came to mind. There was Bill Mulholland, the notoriously volatile chairman of the Bank of Montreal in the 1980s; hot-headed Quebecor Inc. CEO Pierre Karl Péladeau, who's seen a string of losses and executive departures; Heather Reisman, the demanding and egocentric CEO of Indigo Books & Music; and Garth Drabinsky, now under indictment in Canada and the United States over the collapse of Livent Inc. But we were looking for more than just intensity. We were looking for leaders who've built something substantial and lasting, and fighters who've had to battle forces outside and inside their own companies to achieve that.
It would be hard to find a more diverse group than the nine men who made the grade. One trait they all share is the ability to drive relentlessly toward a goal while others around them see only obstacles. That can mean being intimidating or infuriating, but that's part of their job. There are very few who can actually pull it off.
President and CEO, Canadian National Railway Co., 1992-2002
President and CEO, Bombardier Inc., 2002 -
Touchy-feely executives will tell you that slashing jobs and managing through intimidation don't produce results, but investors
prefer the CEO stylings of a Paul Tellier. Over the past decade, Tellier has cut half of Canadian National Railway Co.'s work force and transformed it from a bloated Crown corporation into one of the most efficient and profitable railways in North America. Why else would Bombardier Inc. come calling? One day last December, when Tellier was named CEO of the troubled transportation giant, CN's share price declined by 2%; Bombardier's shot up 7%. As one analyst quipped, "He's created about $1 billion in market capitalization just by arriving at the doorstep."
The son of a cabinet minister in Quebec's Duplessis government, Tellier bristled against authority as a teenager and was expelled from several Jesuit colleges. He spent 25 years in the federal public service, the last seven-1985 to 1992-under Brian Mulroney as Clerk of the Privy Council, the top civil-service job in Ottawa. Blunt in public as well as in private, he created a stir in 1991 by telling nagging Liberal MP John Nunziata to "shut up" during a parliamentary committee hearing.
The following year, CN was in crisis, and Mulroney told Tellier to "go down there and clean the place out." Not one to be wistful, Tellier later said he was "frustrated" to leave the government "because I had not launched a brutal reform of the public service, which is badly needed to this day."
Tellier attacked costs immediately at CN, laying off 11,000 employees in his first few months on the job. CN's losses had been projected at $100 million in 1992, but he chose to take a big hit right away-a $942-million special charge for staff reductions that pushed CN's loss for the year to $1 billion. By 1995, CN's fortunes were vastly improved, and Tellier took the company public at $27 a share, netting $2.2 billion for the federal treasury.
Slashing costs to the bone, he also expanded, buying two regional U.S. lines. CN is now the only North American railroad that runs from the Atlantic to the Pacific to the Gulf of Mexico. The company's share price has scaled steadily upward, peaking at $85 in 2002 before settling more recently at $65.
Now 63, and a fitness and motorcycle enthusiast, Tellier hasn't lost his edge. In November, a month before moving to Bombardier, he laid off 1,150 workers at CN. "We take no joy in announcing these permanent job reductions," he said, "but CN must leave no stone unturned in this productivity initiative." In 10 years at CN, Tellier would often express one regret: not moving fast enough. How'd you like to be working at Bombardier right about now?
President and CEO, Manulife Financial Corp.,
Dominic D'Alessandro says he isn't looking to pick fights. But Manulife Financial Corp.'s CEO often gets mad. And even.
Take last year. In June, a commercial court in Jakarta declared Manulife's Indonesian subsidiary bankrupt and shut it down. D'Alessandro went public immediately, saying his company had been mugged by corrupt judges. In July, the Supreme Court of Indonesia responded by overturning the decision.
The lesson: There's no room for wimps in insurance. The competition is rough these days at home and internationally; the banking and insurance sectors are consolidating. But D'Alessandro is keen to play. He worked at the Royal Bank in the early 1980s and was CEO of the Laurentian Bank of Canada for five years. Since taking over the top job at Manulife in 1994, he has doubled the size of the company by expanding aggressively in Canada and abroad, particularly in Asia. Revenues (from premiums and deposits) totalled $25 billion in 2001.
Thinking big, D'Alessandro last fall attempted something no one else had dared propose. Despite the legislated separation of banks and insurers, he tried to buy Canadian Imperial Bank of Commerce. Finance Minister John Manley quietly iced the plan.
There's no stopping the guy, though. One Friday last December, D'Alessandro met with Canada Life Financial Corp. CEO David Nield and offered him $38 a share for his company. Nield declined. Before the weekend was out, D'Alessandro upped the offer to $40. Nield again declined. D'Alessandro only waited until Monday to launch a $6.4-billion hostile takeover bid.
"I wish I was not as competitive as I am, and maybe a little less combative," he says. "I seem to carry around my own china shop."
Day to day, D'Alessandro isn't one to compromise either. "That's part of the problem with a lot of business executives," he says. "Everybody wants to be consensual, always judging as to what is politically expedient or what's going to fly."
As a boss, D'Alessandro is demanding. He sets ambitious goals for employees, then pushes them harder if they achieve them. "I think bright people really enjoy working with me," he says. Others had better watch out. "What was it Napoleon said? The best thing is to have an intelligent, industrious general. And he could live with an intelligent, lazy general. But heaven forbid that he should have an industrious, dumb general.
"I've dismissed people that I wish I didn't need to, because I liked them personally," D'Alessandro adds. "But professionally, you have to make that separation." You can't get too emotional.
President and CEO, Air Canada, 1999-
At a low point in January, 2002, Robert Milton told a crowd of students at Wilfrid Laurier University, "I feel like I'm Dr. Evil in an Austin Powers movie." It fit. To the greater public, Milton was the relentless monopolist, the ruthless job-slasher, the man who helmed Air Canada in 2001 when it lost $1.25 billion.
From the day he arrived in 1992 as one of then-CEO Hollis Harris's protégés, Milton has displayed an unstoppable drive and lots of rough edges. His promotion to president in 1999 was messy: Harris's successor, Lamar Durrett, had mishandled a pilots' strike and was reprimanded at the annual meeting. Jean-Jacques Bourgeault, a leading heir apparent, was on vacation; he returned to find Milton in the president's chair. Shortly after, Bourgeault and Durrett left, and Milton ascended to CEO.
Milton's no-nonsense style won plaudits when he outmanoeuvred Gerry Schwartz's Onex Corp. in the late-1999 takeover battle for Air Canada and Canadian Airlines. But the applause subsided when the cost-cutting and layoffs-thousands of them-began. Barely a week after the World Trade Center attacks decimated air travel, Milton practically demanded a $4-billion bailout from Ottawa. He didn't get it, and Liberal sources said Air Canada had been pressing for a $1-billion bailout even before the attack.
Meanwhile, Air Canada reduced the number of its flights, often cancelling them at the last minute if not enough seats were sold. Milton jammed more seats on planes while keeping the same number of staff. He also squeezed Air Canada's unions by using one of the oldest tactics in the book: shifting operations from the existing company to a "new" company. Zip, Jazz and Air Canada's other new discount carriers pay lower wages and benefits than the parent. At Zip, he claims, overall costs per pilot are 30% less, 40% less for flight attendants.
Milton says the layoffs and cuts to management salaries are the toughest decisions he's made. "It's hard to describe how it feels to let people go," he explains, "knowing the impact it has on lives, families and children, but you have to decide with your head and not your heart."
Last March, Milton sent a letter to employees telling them they weren't smiling enough. Pamela Sachs, president of the union representing 8,500 cabin staff, fired back: "It's time to look at the coaches and stop blaming the players."
Lately, however, the coach has been on a winning streak. Air Canada earned $125 million in the third quarter ending Sept. 30, the only major North American carrier to post a profit. Its share price has also climbed, from a low of $2 in 2001 to more than $4 recently. Next destination: the $8 at which the shares debuted way back in 1988.
J. Bruce Flatt
President and CEO, Brookfield Properties Corp., 1995-2002
President and CEO, Brascan Corp., 2002-
Bodies were falling out of the sky. But Bruce Flatt, the wiry 37-year-old CEO of Brascan Corp., gritted his teeth and went to work. After the attacks on the World Trade Center, Flatt, then the CEO of Brascan's Toronto-based subsidiary, Brookfield Properties Corp., hired a limousine to drive him overnight to Manhattan to check four Brookfield-owned towers near Ground Zero.
There were reports that one of them, the 54-storey One Liberty Plaza, was near collapse. Flatt sent out messages on his BlackBerry to correct the misinformation. But things looked bad: Inside the building, the lobby was being used as a morgue.
As soon as he could, Flatt sent in truckloads of plywood to begin repairs, the first landlord in Lower Manhattan to do so. "We felt it was important to return to the premises as soon as possible," he says. "It was a calculated risk, but we needed to evaluate the situation, make decisions and help our tenants." Mayor Rudolph Giuliani and Governor George Pataki later praised his initiative, though there was a financial imperative as well: Landlords could continue collecting rent if the buildings were fit for occupancy, even if the tenants were too scared to return.
Flatt prides himself on acting quickly and decisively. "We try to emphasize to our people that doing nothing is a decision," he says. "In the end, it is better to make a wrong decision than none at all."
That cool head helped him win the top job at Brascan, the holding company at the centre of the Hees-Edper conglomerate assembled by accountant Jack Cockwell for Peter and Edward Bronfman. Once part of a sprawling empire, Brascan now concentrates on commercial real estate, power generation and finance. It had revenues of $4.7 billion in 2001. Flatt, who's been with Hees-Edper since 1989, emerged from an almost monastic group of executives under the age of 40 who have little or no life outside the office. "I don't collect anything but shares," he once told an interviewer.
In the early 1990s, Flatt proved himself worthy in one of the nastiest disputes in Bay Street history. At the time, he was president of Carena Developments, Ltd., which had been lending money to Brookfield since the late 1980s. Brookfield was part of the troubled BCE Development Corp., and BCE essentially cut it loose. Brookfield was deeply in debt, but it owned many attractive properties, including BCE Place in downtown Toronto.
Carena extended loans to Brookfield with specific properties pledged as security. But Brookfield's troubles deepened, and it couldn't repay its debts. Its debenture holders, many of them small investors, had their interest payments suspended and lost their principal (their securities weren't backed by specific properties). Under Flatt, Carena gained control of Brookfield and its buildings. The debenture holders and other creditors were left out in the cold, and court cases dragged on for years.
At the time, the office market was bleak. "Brascan was criticized heavily for investing in real estate," Flatt says. "We stayed with our investments, based on value, and didn't let emotions interfere with our judgment." More recently, Brascan has begun looking at distressed power-generation facilities in Canada and the United States. Do you get the sense that Flatt sees things the rest of us don't?
President and CEO, Moore Corp. Ltd., 2000-2002
Bob Burton is a big guy-an All-American offensive lineman in college who did a brief stint in the National Football League in the early '60s. Nonetheless, at his first annual meeting as CEO of Mississauga, Ont., business-forms maker Moore Corp. Ltd., in April, 2001, the company hired an armed policeman to provide security. Shareholders were "ready to burn the building down," Burton recalls, "for obvious and good reasons." The price of Moore's shares on the New York Stock Exchange had sunk below $3 from $17 (all currency in U.S. dollars), and two previous CEOs-both turnaround specialists from the U.S.-had failed to stanch massive losses.
Burton brought out the scythe right away. No more giant $35,000 Christmas tree in Moore's Chicago office. No more limos. No more $1.5-million-a-year contract with a public relations agency. "When you're losing $66 million [a year], you don't need any PR," he says. "They will come and find you." He also shifted day-to-day managerial control to a small team of associates headquartered near his home in Connecticut.
Burton grew up devoutly Baptist, the son of a grocer in an Illinois coal-mining town. He ran the publishing division of broadcasting giant ABC in the 1980s, before taking over at Connecticut-based printer World Color Press Inc. in the 1990s. His mantra: Set clear priorities. "You're there to make money for the shareholders," he says. "I drive everything on earnings per share and financial goals, and stay away from the soft stuff. When people talk [about soft issues], they're just looking for a way to cover themselves."
Moore's results speak volumes: a $73.1-million profit for the first nine months of 2002, compared with a loss of $282.6 million during the same period a year earlier. The company's shares hit $9 on the NYSE late last year.
Although Burton doesn't revel in his slash-and-conquer reputation, he says that it's often a necessity in order to prevent a company from going under. "I let 3,000 people go at World Color, and we'll probably let 4,000 go at Moore," he explains. "There's no way you can feel good about it. If you can do that and save 10,000 jobs, then that's the only way you can explain it." He's also proud of personally donating as much as $5 million to $10 million at a time to universities for business scholarships and minority programs.
Burton announced his resignation in December, his mission accomplished. Investors were sorry to see him go-Moore's shares declined 11.3% that day. Now that he's 63, might it be time to relax? Yes and no. While Burton plans to spend more time with his wife and grandchildren, the talk is that he'll end up back in business in another turnaround situation. "My only regret is not being able to work another 63 years. I have no interest in retiring. I have no hobbies. I enjoy working."
Michael Budman and Don Green
Co-founders, Roots Canada Ltd., 1973-
There's a fine line between persistence and pushiness. It's a line Michael Budman and Don Green, the relentlessly promotional co-founders of clothing and accessories retailer Roots Canada Ltd., haven't discovered yet. By now, most Canadians are probably familiar with the Roots story, if only because Budman, 58, and Green, 56, tell it so often themselves.
The pair grew up together in Detroit and developed a fascination with Canada during summers spent at Camp Tamakwa in Algonquin Park in the late 1950s. In 1973, they arrived in Toronto and tried to buy the Canadian distribution rights to the negative-heel Earth Shoe. When they were refused, they borrowed $20,000 from Green's father and opened a negative-heel shoe store of their own. Over three decades, that Toronto location has mushroomed into more than 200 stores-140 in Canada, seven in the United States, 68 in Korea and 12 in Taiwan-and estimated revenues of about $300 million a year. Roots's ever-expanding retail line includes leather jackets and sweatshirts, among other clothing. It also provides customized clothing for corporate clients and licensing deals for everything from Roots vitamins to Roots furniture. Then there was the airline, Roots Air, though it folded in May, 2001, after just 40 days.
Budman's and Green's marketing technique is the constant schmooze. Budman, in particular, trails after Hollywood stars passing through Toronto and anywhere else he happens to be-Arnold Schwarzenegger, Michael Douglas, the Backstreet Boys, you name them. Roots has also hit the publicity jackpot by outfitting Olympic teams, starting with the hugely successful backwards "poorboy" caps for the Canadian team at the 1998 Winter Games in Nagano, Japan. It outfitted the Canadian team at the Summer Games in Sydney in 2000, and the U.S. and Canadian teams in Salt Lake City in 2002. In Athens in 2004, Roots will suit up Britain as well.
Roots-weary Canadians gripe about two Americans appropriating the beaver, the maple leaf and other national icons and selling them back to locals. But the duo have proven time and again that they can out-Canadian Canadians. One journalist remembers spotting Budman and Green at an outdoor ice rink in the mid-1990s, just after they'd appeared on the cover of Toronto Life magazine. He and a couple of friends challenged the pair to a pickup game, with a local kid added to the Roots side to make it three-on-three. Budman, who says his biggest regret is "not playing on [Detroit Red Wings star] Ted Lindsay's right wing," skated end to end and scored immediately. "They kicked our asses," says the journalist.
The pair often manage by impulse. There are stories of their conceiving a big campaign one week, then returning from a weekend of fun to change the whole idea after staff spent days working on the concept. Anyone who tries to return to the previous week's inspiration is regarded as a space alien. As a result, there are failures: the airline (which Roots says cost nothing because it was a licensing deal), a resort in Colorado, an on-line sales operation and a European fashion magazine called Passion. "Most decisions are instantaneous," says Green. "A few linger longer."
Budman and Green don't let reversals get to them. Green, who carries a yoga mat in his car trunk, says, "Success is measured by how one feels about the reality they have created." Budman puts it in more down-to-earth terms: "Every day I win and lose. I bat around .500." When asked how he measures success, he says, "By the smiles on customers' faces."
The duo explored the possibility of an IPO in the late 1990s, and Green says one of the toughest decisions they've ever made was to not proceed with it. The stock market turned rough in 2000, and the hit-and-miss nature of Roots's business is scary for some investors. At a meeting of retailers in June, 2001, Roots CEO Marshall Myles was asked to give a business forecast: "Volatility, I think, would be the best word," he replied. But, hey, the 2004 Olympics are just around the corner, and Budman and Green will undoubtedly have some fabulous things to tell you before then anyway.
President and CEO, Telus Corp., 2000-
Darren Entwistle can take it. Even the union leaders who hate him have to give him credit for that. Barely a day-or even an hour-goes by when Entwistle isn't reminded of the reversals Telus Corp. has suffered since he was named CEO in July, 2000, at age 37. There's the union-sponsored billboard outside the Vancouver office that asks, "Are you satisfied with your Telus service?" It has Entwistle's e-mail address and a chart showing the slide in Telus's share price from $38, where it stood in October, 2000, when Entwistle bought mobile provider Clearnet Communciations Inc. for $6.6 billion.
In a meeting room next to his office, Entwistle has hung a framed copy of a notice from New York's Moody's Investors Service last July that downgraded the majority of Telus's debt to junk status. Like the union, Moody's blamed the company's punishing debt load on its bold acquisition of Clearnet. Entwistle plans to break the frame across his knee the day Telus regains its investment-grade rating.
As 2003 began, contract talks between Telus and the Telecommunications Workers Union were deadlocked over Entwistle's demands for concessions and his plan to cut a quarter of Telus's work force by 2004. Since he announced that plan last summer, more than 6,500 workers have left through attrition and early retirement. But, in December, Entwistle announced another reduction of 1,200-without telling the union in advance.
If he's worried, he certainly doesn't show it. One of his favourite quotes is from U.S. General George S. Patton: "A good plan, violently executed now, is better than a perfect plan next week." Entwistle also likes to take managers hiking in the mountains to motivate them. Then there's the acronym FIFO, which, in union-speak, means "first in, first out"-in other words, the most recent hires should be let go first in any layoffs. But for Entwistle, it's a short form for "fit in or fuck off."
Entwistle is certainly young and brash, but he has solid telecom credentials. His father was a Bell Canada lineman in Montreal, and Entwistle himself climbed poles and strung line in summers as a university student. He joined Bell full-time after graduating from McGill with an MBA in 1988, and first won recognition in the early 1990s as a finance specialist for Bell Canada International in the U.K. In 1996, he helped engineer the four-way $10-billion merger that created Cable & Wireless Communications; he was named president of the U.K. and Irish operations in 1999. To this day, Entwistle says his most difficult career decision was returning to Canada in 2000 to transform Telus.
The company desperately needed shaking up. Edmonton-based Telus Corp. and BC Tel had both been sleepy provincial telephone monopolies before they merged in 1999. The contracts for the B.C. employees were particularly generous-many of them get seven or eight weeks of paid holiday a year. Entwistle's acquisition of Clearnet just 40 days after he arrived threw things into turmoil. "Set the pace of change through action," he says. "Move boldly and execute with passion and precision."
The low point was last July, just after the Moody's downgrade, when Telus's share price sank to $5.76. Since then, Entwistle has been on a roll, and the stock has tripled. Telus reported a lower-than-expected loss of $110 million for the third quarter ended Sept. 30. Investors focused more on Telus Mobility, the old Clearnet, where operating profit jumped 40% to $165 million. Analysts expect more improvements next year. Stay tuned for the sound of breaking glass.
Co-founder and CEO, Nelvana Ltd., 1971-2002
Sweet on the outside, bitter on the inside. That's often been the story of Nelvana Ltd., the internationally acclaimed children's animation house that brought us Franklin the turtle and TV versions of Babar the elephant and Tintin. The company was founded in a grimy Toronto apartment in 1971 by Michael Hirsh and Patrick Loubert, two young York University grads who used a credit card for financing. Clive Smith, a British animator, joined soon afterward. In 2000-three decades and many Emmy, Gemini and other awards later-Corus Entertainment Inc. bought Nelvana for $540 million.
That legendary ascent in fact wasn't easy, marred as it was by brushes with bankruptcy and infighting among the partners. Nelvana has narrowly avoided bankruptcy twice. In 1983, Rock and Rule, an animated movie aimed at teenagers that featured the voices of Iggy Pop and the music of Lou Reed and Deborah Harry, bombed. Things got so desperate, Hirsh recalls, that "we would give people cheques and say, 'Okay, we'll tell you the days when you can cash them.'" In 1989, the American distributor of Nelvana's TV series T and T (starring Mr. T and actress Alex Amini) went belly up. Hirsh disregarded advice to fold Nelvana, pried the series out of U.S. bankruptcy courts and found a new distributor within six weeks. "You get everyone to believe in your vision," he says, "and, inevitably, you step on a lot of toes."
The biggest internal divide occurred in 1996, two years after Nelvana went public. Golden Books Family Entertainment Inc. wanted to buy Nelvana for $140 million. Loubert, Smith and other Nelvana executives wanted to sell. Hirsh didn't. He's normally soft-spoken-one former colleague describes him as the "professor of persuasion"-but at one point, he and then-Nelvana COO Eleanor Olmstead were swearing up and down the hallway at one another. Everyone in the Canadian entertainment industry knew about the infighting, but it took Golden Books several months to catch on. When it did, it walked away from the deal. Hirsh hired a U.S. "corporate therapist" to mediate meetings and get any anger and resentment out in the open. It worked, and the three founders closed ranks.
Hirsh felt vindicated when he extracted a much bigger purchase price from Corus in 2000. Still, last October, when Hirsh announced he would step down, Corus said it was taking a $200-million writedown on Nelvana. The staff, which ran upwards of 700-strong in 2000, will be slashed to 200 by the end of August.
Hirsh says the ups and downs in the animation business have always been harsh. He's told people who were laid off that other work will crop up. "If they have talent and the ability to organize themselves," he says, "they really have an opportunity."
At the moment, Hirsh is writing a book about how to succeed as an entrepreneur; he's also consulting for Corus. Eventually, he wants to start a new children's entertainment venture, but he's not yet sure exactly what that might entail. Hirsh likes being an entrepreneur-one who's committed enough to go down with the ship if necessary. "They're going to have to tear you dead," he says. "It's a great life lesson, but not one you want to do too often. I'm not going to do it eight more times."